Executive Summary
Canmac Economics Ltd. conducted a socio-economic impact analysis of the Cape Breton Tele-service sector for the 1998 to 2002 period. The purpose of this study is to present our findings with respect to:
- the total socio-economic impact of the Tele-service industry on Cape Breton Island including the direct, indirect, and induced impacts.
- the fiscal impacts on the federal, provincial and Cape Breton municipal governments.
In addition to estimating the socio-economic impact, this study also develops estimates of the Cape Breton region Gross Domestic Product.
Canmac’s approach to this project involved conducting direct interviews with the Tele-service sector firms and selected supplier surveys. The impact analysis involved simulations with the Canmac Econometric Model of Cape Breton and the Cape Breton Input-Output Model.
Our major findings are as follows:
• Over the 1998 to 2001 period, the Tele-service Sector generated $23.4 million in Cape Breton based construction expenditures. These construction expenditures resulted in total household income creation of $2.9 million per year. These construction expenditures also resulted in total employment of 101.1 full-time equivalents per year.
• In 2002, the Tele-service Sector generated $5.8 million in Cape Breton based construction expenditures. These construction expenditures resulted in total household income creation of $3.0 million and total employment of 106 full-time equivalents.
• On an annual average basis, the Tele-service sector spent $14.9 million in operational expenditures over the 1998 - 2001 period. These operational expenditures resulted in direct household income creation of $8.6 million, and total household income creation of $11.7 million. These operational expenditures also resulted in direct employment of 677 full-time equivalents and total employment of 804 full-time equivalents per year.
• The Tele-service sector spent $84.9 million in operational expenditures in 2002. These operational expenditures resulted in direct household income creation of $49.2 million, and total household income creation of $66.7 million. These operational expenditures also resulted in direct employment of 3,466 full-time equivalents and total employment of 4,518 full time equivalents.
• The Tele-service sector is a significant generator of fiscal benefits. In 2002, the sector provided $11.9 million in Federal fiscal benefits and $9.4 million in provincial benefits.
• The major industry sales in 2002 that are generated in the Cape Breton economy as a result of the tele-service sector include:
Telecommunications $7.1 million
Professional Services $11.8 million
Retail $36.7 million
• Some of the other socio-economic impacts associated with the Tele-service sector include:
- reduction in out-migration of 636 persons over the next five years.
- reduction in unemployment insurance payments with 17.5% of the Tele-services workers coming directly from EI.
- reduction in welfare payments with 6.1% of Tele-service workers coming from social assistance.
The Cape Breton Tele-service sector has become an important economic driver of the Cape Breton economy. In 2002, this sector has accounted for $66.7 million or 2.6% of total Cape Breton household income; 4,518 in person years of employment, or 8.3% of total employment. In 2002, we estimate the Cape Breton Gross Domestic Product at factor cost at $3487.8 million. The tele-service sector’s total economic impact accounts for $83.0 million or 2.4% of GDP.
The Cape Breton Regional Municipality is the major beneficiary of the Cape Breton Tele-service sector. With all but one of the Cape Breton call centres located in the CBRM, the region receives the majority of the jobs, industry suppliers and municipal taxes.
Our review of the tele-service sector has revealed a significant creation of economic benefits. These benefits are created with taxpayer dollars. In terms of economic benefits, every dollar of government incentives generated, if we assume a project life of ten years and a discount rate of 10%, $8.3 in income per $1 of government incentive.